Islamabad, January 21, 2025 – The President of Pakistan has instructed the Federal Board of Revenue (FBR) to take immediate steps to address the issue of excessive taxation on electricity bills, following a significant decision that validates the recommendations of the Federal Tax Ombudsman (FTO).
The President’s directive comes after rejecting 20 representations filed by the FBR challenging the FTO’s orders. The complaints, lodged under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000, were primarily from low-income earners. These individuals argued against the withholding of Income Tax and Sales Tax on their electricity bills despite their earnings falling below the taxable income threshold. This situation led to undue financial strain on citizens already struggling to make ends meet.
The FTO’s investigation revealed a blanket imposition of Electricity Duty (ED) on consumers, irrespective of their income levels. This uniform approach disproportionately affected low-income households, exacerbating their financial burdens. Additionally, the investigation uncovered systemic issues in the timely remittance of ED to provincial energy departments. Instances of misuse and misallocation of funds collected under this head were also noted, raising serious concerns about transparency and accountability.
One critical issue highlighted was the ambiguity surrounding the legal status of ED collection by electricity distribution companies. This lack of clarity questioned the legitimacy of taxes imposed by the FBR in conjunction with ED. Furthermore, cross-provincial discrepancies and substantial outstanding dues pointed to broader inefficiencies in the existing taxation framework.
To tackle these pressing issues, the FTO recommended the formation of a committee comprising representatives from key stakeholders, including the Large Taxpayers Office (LTO), Lahore Electric Supply Company (LESCO), and the Punjab Energy Department. This committee’s mandate would be to thoroughly review the ED regime and its associated taxes, aiming to formulate policies that would alleviate the financial burden on ordinary consumers.
By upholding the FTO’s recommendations, the President has emphasized the urgency of addressing unjust taxation practices. This decision highlights the need for a collaborative approach among relevant stakeholders to reform the taxation system, ensuring fairness and transparency. The initiative aims to provide much-needed relief to taxpayers, particularly those from economically vulnerable segments, by reducing the financial strain imposed by excessive taxation on electricity bills.